Prime Minister David Cameron must apologise for his "appalling error of judgment" in hiring ex-News of the World editor Andy Coulson, Ed Miliband insisted today.

Amid reports that Mr Coulson is set to be arrested by Scotland Yard, the Labour leader urged Mr Cameron to "come clean" about their discussions about phone hacking.

Mr Miliband said the current scandal was "difficult" for the Prime Minister because of his "personal relationships" with some of the key figures involved.

"Putting it right for the Prime Minister means starting by admitting the appalling error of judgment he made in hiring Andy Coulson, apologising for bringing him in to the centre of the government machine, coming clean about what conversations he had with Andy Coulson, before and after his appointment, about phone-hacking," he said in a speech at Thomson Reuters in London.

Mr Coulson, who resigned from the News of the World in 2007 when its royal editor was jailed for intercepting the voicemails of royal aides, was subsequently appointed by Mr Cameron as the Tories' communications chief.

He became director of communications at Number 10 when Mr Cameron became Prime Minister last year, but eventually quit that job too in January because of the continued reports about phone hacking during his time at the Sunday tabloid.

Mr Coulson has reportedly been told to attend a central London police station today for questioning over allegations linked to the scandal.

After News International chairman James Murdoch last night announced the News of the World was to be shut down, Mr Miliband said that simply reopening the paper as "the Sunday Sun" would not be enough to answer critics.

Reiterating his demand for News International chief executive Rebekah Brooks, who was editor when Milly Dowler's phone was allegedly hacked, to consider her position, he said: "I welcome James Murdoch's admission of serious errors.

"But closing the News of the World, possibly to reopen as the Sunday Sun, is not the answer.

"Instead those who were in charge must take responsibility for what happened. And politicians cannot be silent about it."

The Labour leader also called for the press watchdog to be scrapped in the wake of the phone-hacking scandal, saying it had been exposed as a "toothless poodle".

He backed continued self-regulation of the press, but said the Press Complaints Commission (PCC) had "totally failed" to get to the bottom of the phone-hacking allegations.

"Its chair admits she was lied to but could do nothing about it. The PCC was established to be a watchdog, but it has been exposed as a toothless poodle," he said.

"Wherever blame lies for this, the PCC cannot restore trust in self-regulation. It is time to put the PCC out of its misery."

He called for Fleet Street figures to lead reform themselves and help create a new body with more independence from newspapers, tougher investigative powers and the ability to force corrections.

"Change should be led by the many decent editors and people in the industry who want to see change," he said.

"I call on journalists, and those concerned with decent journalism, to put the reform of the system of self-regulation at the centre of their concerns."

He added: "The press would be showing to the public that it was taking the first steps to cleaning up its act if it started to make change now.

"Today, I want to call on all the many decent people in the industry to take the initiative and start to make this happen."